How to Increase Your Financial Durability

Posted On 15 August 2023

Last updated on April 5th, 2024

There is a lot of information about personal finance out there, but what is financial durability? It’s something that Equifax started scoring in 2020 – not that long ago! Equifax is a company that is known as one of the credit bureaus. So, what is it that they are doing with a financial durability score?

They have found that there are factors outside of a person’s credit score that can determine a person’s ability to continue spending and paying. That is financial durability. Basically, if there was an interruption in your paycheck, how long could you continue like normal?

Even people with good credit scores can rate low in financial durability. These are the people who are living paycheck to paycheck. They are conscientious payers, but they have few liquid assets (cash) available to them.

The purpose of Canoosa Finance is to help people increase their financial durability. Having financial durability is not something just for a major crisis. It is something that works like a shock absorber to take the financial “bumps” out of our lives.

Carry emergency cash.

I first heard about carrying emergency cash from the book “Rhinoceros Success”. In the book, he recommended carrying $100. That was in the early 80’s. Today I recommend carrying $500.

This cash is not for spending cash. It’s for fixing problems! Except for this carrying cash, I generally don’t carry cash anymore. If I happen to go to a place that doesn’t take cards, I have the cash. Then I replace it as soon as possible.

There was a day that the debit card system crashed in Canada for the whole day. Cash was still accepted at places. When we carry cash, a system crash turns into a minor inconvenience. This is the first part of building your financial durability.

Keep cash at home.

In addition to the carrying cash, I recommend keeping a month’s worth of cash at home.  It’s not just me. Sweden who has switched over to a (almost) cashless society, recommends having some cash on hand.

This can come in handy if your bank is closed (maybe a pandemic or cyber attack), or if the repairman only takes cash (or gives a discount for cash). As Sweden said, even during peacetime having cash on hand is a good idea. Now, your financial durability is increasing!

Keep cash in the bank.

While on the topic of cash, financial experts recommend having 3-6 months of expenses in an emergency fund in the bank. Some of this emergency fund can be the minimum account balance needed so you don’t have to pay a monthly fee.

This emergency fund does not have to be for a life-or-death emergency. If your paycheck is delayed for some reason, you can still pay your bills. When a person gets laid off there is a waiting period before the benefits start. Then, when they do start, unemployment only pays a portion of what was earned at the lost job. Having an emergency fund is a big part of a person’s financial durability plan.

Other things this emergency fund can cover are insurance deductibles, medical expenses, car repairs, and home repairs or home appliances that die. This money is there for when it is needed because the day will come that it is needed. I love the dictum: Everything’s good until it isn’t.

Keep a full pantry (& freezer).

Canoosa Finance recommends using the 1-Up System. What is this? It’s not 1-Upmanship – no one likes that!

The 1-Up System is simply having at least one unopened non-perishable food item in your pantry or freezer. When that one is opened or used, that item goes on the shopping list. Not only does this add to your financial durability, it lowers your stress because there are very few times that you discover you are out of an item while you are cooking.

Keeping debt to a minimum.

Debt payments are a fixed expense. When we have less debt, we have less that we have to pay every month. If things go sideways, having less debt means that there is not as much that must be paid every month. That increases a person’s financial durability.

Some of the ways that we can keep debt to a minimum is by living below our means. Do we need a house that expensive? Can we find a less expensive car that will meet our needs? If our credit card is not paid off every month, that is an early warning sign that we are living beyond our means.

I’m not saying that we should live a destitute life. We need to enjoy life now. The trick is to spend money intentionally. Here in North America, we have so many consumer options available to us. We need to learn to control our spending and keep our desires toned down.

Learn skills.

It doesn’t matter where you learn skills. It can be on-the-job training, university, trade school, Youtube, watching someone, or a book from the library. Do you only know how to do a few things? Or can you do many things?

We should find an area to focus on and become an expert. With that said, we should know (or learn) how to fix things, cook, clean, and understand how life works.

When we have a skill (or skills) that are in demand, we add to our financial durability. If we lose a job, we can find another one. The name of the game is making money. When we have skills, we can use them to our advantage.

Develop multiple sources of income.

Taking this a step further, when we develop more than one source of income, we strengthen our financial durability. If one of the sources of income should dry up, we still have money coming in.

Multiple sources of income can be a spouse that works, a second job, a side hustle, self-employment, dividends, or rental properties. There are so many different ways to add to your income!

Wrap Up.

Financial durability can be built up on any income. It probably won’t be easy. If you came here looking for easy, you won’t find it. Sorry! I am here to tell it to you the way I see it.

The benefits of financial durability are more confidence, less stress, more options, and generally, a better quality of life. We need to get ourselves out of the trap of not having any liquid resources. When we have food and money, we can enjoy the benefits of financial durability.